Corporate income tax exemption for IC and software industry
IC companies may be exempt from paying corporate income taxes (CIT) depending on two factors:
- the number of operating years and;
- the size of IC projects.
The tax relief period starts from the first profit-making year of IC manufacturing enterprises. For IC production projects, the preferential period will start from the tax year when the project first obtains its production and operating income.
IC enterprises operating for more than 15 years with projects using less than the 28-nanometer processing size will be exempt from CIT for up to 10 years. On the other hand, those that use less than 65nm will be exempt for five years. For the following five years, they will get a 50 percent discount on their CIT. To note, the statutory CIT rate for tech enterprises is at 25 percent, which means that the tax cut will be at 12.5 percent. On the other hand, the statutory CIT rate for an IC and software company qualified as a high-and-new technology enterprise (HNTE) is at 15 percent.
Also, check out our guide on Technology Enterprise Registration for SMEs in China
Meanwhile, software enterprises involved in chip design, packaging, testing, and relevant equipment will be exempt from CIT for two years. For the following three years, they will enjoy a 12.5 reduced CIT rate as well. Key encouraged enterprises will also be exempt from CIT for two years and will get a 10 percent reduced CIT rate in the subsequent years.
Summary of tax incentives for IC and software enterprises
Exemption of import tariffs for IC and software products
Within a given period, IC manufacturing enterprises will be exempt from import duties based on certain criteria. The following manufacturers will be duty-free for their imports for the self-use of raw materials, equipment, spare parts, technologies, etc.
- Producers of logic circuits with integrated line widths of less than 65nm;
- Memory devices and enterprises producing featured ICs with line widths of fewer than 0.25 microns. These include enterprises producing masks and silicon wafers of 8 inches or more;
- Compound IC manufacturers and advanced and testing companies with integrated line widths of less than 0.5 micrometers;
- Key IC design and software companies;
- IC production and advanced packaging and testing companies.
In addition, IC enterprises with significant projects will be allowed to pay import VAT through installments. The General Administration of Customs and other relevant authorities are in charge of specifying the details of this scheme.
China’s new policy also stresses the establishment of overseas marketing networks. Hence, the development of international services outsourcing businesses is seen to promote the export of IC and software services.